Carter’s (NYSE: CRI) shares climbed 3.5% in premarket trading on Monday following a ratings change from Wells Fargo. Analyst Ike Boruchow moved the stock from Underweight to Equal Weight and raised the firms price objective to $42 from $30.
In a note accompanying the upgrade, Boruchow pointed to three central developments that influenced the revision: management changes under a new chief executive officer, ongoing strength in direct-to-consumer (DTC) sales and the prospect of reduced tariff costs.
He summarized his view of the companys trajectory in direct language:
"The combo of new leadership + evolved DTC strategies is driving fundamental improvements in the model in our view. At the same time, we believe CRI has some very under-appreciated inorganic upside via lower tariff rates,"keeping the emphasis on both operational execution and potential margin benefits from cheaper import costs.
Wells Fargo adjusted its near-term sales outlook for Carters, raising its estimate for second-quarter comparable sales. The firm said it expects the forthcoming second-quarter earnings release to act as a positive catalyst for the shares, adding that third-quarter guidance and margin metrics are likely to beat consensus expectations.
On the earnings front, the bank increased its fiscal 2026 earnings-per-share (EPS) projection to $3.30 from $3.00 and pushed fiscal 2027 EPS to $3.80 from $3.50. Both revised figures sit above the consensus estimates noted by the analyst, which are $3.22 for fiscal 2026 and $3.61 for fiscal 2027.
The new $42 price target corresponds to a multiple of 11 times Wells Fargos 2027 EPS estimate.
Market and sector context
- The company is a participant in the childrens apparel segment of the consumer discretionary sector, and its shares responded positively to the analysts reassessment.
- Tariff developments noted by the analyst tie the companys margins to trade policy and import cost dynamics, a consideration for apparel and retail supply chains.
What to watch next
- The firm flagged the upcoming second-quarter earnings report as a likely catalyst, and investors will be watching reported comparable sales and management commentary for confirmation of the analysts expectations.